Trucking transport makes about 70 percent of all freight needs in the US. It means that more than $700 Billion worth of goods is transported through trucking annually. It sounds like an excellent time to start your own trucking business. But there are challenges that you have to tackle if you are serious about pursuing this path. Presently, there are driver shortages, increasing freight rates, and rising demand for freight services. Thus, it is of extreme importance to develop a trucking business plan before diving into this industry.
Like any other business endeavor, you have to make a trucking business plan for your semi trucking or trucker company. This plan should incorporate all the details you need to start, the operation phase, and how you can sustain it. Likewise, starting and running a business like this will require funding. Are you ready to put on your gears and start it? To help you, we have here a comprehensive guide on creating a business plan so that you can start and succeed in your trucking business.
How Much Does It Cost to Start a Trucking Company?
If you want to be an owner-operator of a trucking company, you have to prepare for the cost of starting and running it. This should be incorporated in your trucking business plan as you start with the preparations. There are several phases for you to consider. First is the start-up, then there is the allocation for fixed and variable costs, business registration costs, buying or renting vehicles, insurances, registration, and many others.
Here’s a sample breakdown of the expenses that you might have to face and include in your trucking business plan when you pursue a tracking business.
Business Start-Up Costs
The initial costs for starting a trucking company is around $6000 to $15000. This conservative estimate does not include the equipment that you will use. The start-up costs will cover the registration and documentation requirements. This will be around $900 to $,1500, while each plate for your trucks can range from $500 to $3000. You will also need permits and tax payments for Heavy Vehicle use which can go up to $600 per truck. There may also be state-specific tax applied to your vehicles. On average, this costs about $500.
In terms of start-up costs, it is favorable for smaller operators who can start quickly using a low investment. Large-scale trucking businesses may need millions in capital to start running. So if you want, you can start with a single unit. This will trim down your capital to a manageable level until you start earning.
Fixed and Variable Costs
Typically, start-up business costs are separated into fixed and variable costs. When you tag them as fixed costs in your business plan, it includes the prices of your truck unit, yearly permits, insurance costs, taxes, and regular maintenance expenses. Variable expenses on the other hand pertain to repair costs, fines, and fuel costs. On average, these variables will cover about 60 to 70 percent of your operating costs.
US DOT Number and Business Registration
Other essentials you must prepare for when you want to know how to start trucking company is to get a US DOT number. This can cost around $300. Likewise, business registration costs for new business owners can range up to $500. It can vary from one state to another.
UCR or the Unified Carrier Registration is another expense that you have to foresee when you want to start a trucking business. For two vehicles, the cost is around $69, but for three to five, it is at $206. You may visit their website to know more about registration fees and requirements.
In terms of buying equipment, carefully choose units in excellent condition. Even if you pay a premium for them, it will entail lower maintenance costs in the long run. If you need to acquire used units, its maintenance record should be mint and accurate. Second hand but road-worthy units may also give you the advantage of lower yearly insurance, thus giving you more for your new business plan.
Ideally, rigs should be around five years or younger with less than 600,000 miles on record. If it has better specs but it will give you more or less 10 years of worry-free operations sans costly repair expense.
Trucks for such a business can cost around $15,000 to $75,000. You may also need to pay the downpayment for each unit and the amount will depend upon the vehicle you choose. All of these should be considered when you are preparing your financial projections once you write a business plan for your trucking company.
One of the most important fixed expenditures in a trucking business plan. There are several considerations to come up with total coverage. One main aspect to consider is the age of the equipment, its location, and the commodities that need hauling. Insurance companies will take all of these into account when calculating your insurance premiums.
Depending on the equipment or trucks’ condition, the cost of premiums for your annual insurance is around $10,000 for each one. The figures can change depending on the type of coverage, year and condition of vehicle, model, make, and the experience of your drivers. Ideally, you can get an FMCSA-compliant logging device to reduce the cost of your premiums.
Is It A Good Idea to Start a Trucking Business
The answer depends on how you run your trucking business. Like any other companies, trucking and logistics can be challenging. The operational costs and profits are based on the miles spent by the trucks or equipment on the road. In 2015, the total costs combined with average miles for trucking companies was around $128,000. This business plan can be really hard to gauge whether it will be profitable or not.
But despite the challenges, the rate of small trucking business failures are currently decreasing. Also, there are now various tools that you can utilize to help you effectively run your trucking company.
Do I need a CDL to own a trucking company?
CDL endorsements are not really necessary to own or start a trucking company. There are just instances when such endorsement is needed to operate. When you write a business plan, you have to ensure that you bring in all situations where your operations will be involved.
If you plan to take on clients for the transport of Hazardous materials, you will need to have additional CDL endorsements to operate for such cargoes or use specialized trucks. Some endorsements you can get include H- Hazmat for transporting hazardous materials. According to regulations, hazardous materials include flammable liquids, explosives, gases, and other materials that can cause hard. The H-HAZMAT endorsement costs around $100 and $87 will be asked for TSA screening.
Another is the P endorsement for Passenger transport vehicle operations. This permit will let you transport 16 passengers and the fee is about $14. A skill test and a 20-question test will be given to the driver.
Also, the X endorsement is required for trucking companies if you will be transporting hazardous materials in a tanker. It costs around $14 and there will be a tanker test and hazmat test that drivers need to pass.
How can I start a trucking business with no money?
Every business requires some form of capital to start operating. You can start a trucking business plan while you are still building up your capital to buy more equipment and expand your small trucking business. Here are some tips for your trucking business plan.
Preparation and Planning Phase
Although it may not involve as much cash as it is, a small trucking company does still needs a lot of planning and preparation to ensure that it starts on the right foot. The best way to start is through the owner-operator approach. You will have trucks, but you will be involved in the operations too. Some new owners also start as drivers, but if you don’t have industry experience, you have to study and understand all the requirements of running this business. Regardless of the structure, you want in your company, it is essential to prepare and plan everything.
Choosing a Plan Format
There are basically two types of business plans you can pursue a trucking business. There is a traditional format that is comprehensive and will involve various details such as company description, executive summary, market analysis, sales strategy, personnel plan, and others. The other one is the lean startup format which is more flexible and requires fewer details than the traditional plan. A startup business plan format may include details such as executive summary, marketing, financial projections, and others.
The FMCSA requires different requirements depending on the type of operations you are interested in engaging in. You will need a CDL if you will be driving your equipment too. Some legal requirements you need to comply with are the US Department of Transportation Number, International Fuel Tax Agreement stickers, International Registration Plan, and Motor Carrier Number.
Funding your business
Financial projections are crucial in any business plan, especially in the trucking industry. You may need around $10,000 to $30,000 to start trucking companies’ operations. It will cover the cost of the vehicle down payments, insurance, and other state-specific compliances.
Even if you do not have enough capital, there are many ways for you to finance your new business. With good credit records, you can find reasonable funding through a bank loan or a home equity credit. You can also use your savings or dispose of some of your properties to build up funding for your new business.
If funds are available, it is always best to purchase your own assets and ideally, always go for quality when it is for commercial use. A new truck means fewer maintenance expenses, repairs, insurance coverage, and downtime. If you are considering second-hand units, make sure that they are well-maintained and come from known manufacturers. This forms part of the executive summary of your business plan including your plan to grow your business.
Preparing Trucks for the Road
Before you can start freight movements, you must have all the requirements for you to roll out. Make sure you have complied with all insurance premium coverage, USDOT numbers, and registrations. There should also be RFID tags on your windshield and your International Registration Plates if you will move across different states. These should be one of the plans you have in your trucking business plans.
Hiring of Drivers
One of the most challenging parts of running a trucking industry is hiring and retaining good drivers. The industry has a very high turnover rate and the issue is even more prevalent in small carriers. The best strategies for driver retention should start with an effective recruitment process. Take note of the applicant’s crash data and roadside inspections for the last three to five years. Make sure to plan and focus your offers on the employee’s happiness and fulfillment too, not just cash-based incentives. Hiring and keeping good drivers is one of the keys to success in a trucking business.
Growing a Client Base
For your truckers company to grow, you need a steady stream of clients, not just long-term ones. Make sure that one client will not cover more than 20 percent of your revenue. Thus, keep at least five clients for a constant supply of transporting jobs. Attract more clients using a website, social media presence, or use online freight boards. Marketing is a crucial part to grow your business. Make sure to have a business plan on how to go about marketing your services and your trucking company.
Use the Right Tools
Fortunately for new owner-operators today, there are now apps and tools that will help you increase productivity and run your company successfully such as the Electronic Logging Device. Modern ELDs also have better fleet management features such as idle time tracking, IFTA calculations, and vehicle diagnostics. It is also easier to develop a business plan for a logistics company including all the marketing and social media exposure with the help of innovative tools.
The trucking business in the US remains to be one of the most challenging, yet rewarding ventures that interested owner-operators can explore. If you make the right research, plan, and prepare appropriately, you can boost your operations, marketing, funding, and make your company run smoothly.